1

SERVICE TAX.
CH - 1. DUTYIES OF SERVICE TAX.
Service Tax is a tax imposed by Government of India on services provided in
India. The service provider collects the tax and pays the same to the

government. It is charged on all services except the services covered in the

negative list (Section 66d of Finance Act'1994) of services & services covered
under Mega Exemption Notification (Notification NO. 25/2012 ST dated
20.06.2012). The current rate is 12.% on gross value of the service.

Dr.Raja chelliah committee on tax reforms recommend the introduction of

service tax. Service tax had been first levied at a rate of five per cent flat from
15 July 1994 till 13 May 2003, at the rate of eight percent flat w.e.f 1 plus an
education cess of 2% thereon w.e.f 10 September 2004 services provided by
service providers. The rate of service tax was enhanced to 12% by Finance
Act, 2006 w.e.f 18.4.2006. Finance Act, 2007 has imposed a new secondary
and higher education cess of one percent on the service tax w.e.f 11.5.2007,
increasing the total education cess to three percent and a total levy of 12.36
percent. The revenue form the service tax to the Government of India have
shown a steady rise since its inception in 1994. The tax collections have grown
substantially since 1994-95 i.e. from Rs. 410 crores in 1994-95 to Rs.132518

crores in 2012-13. The total number of Taxable services also increased from 3
in 1994 to 119 in 2012. However, from 1 July 2012 the concept of taxation on
services was changed from a 'Selected service approach' to a 'Negative List
regime'. This changed the taxation system of services from tax on some
Selected services to tax being levied on the every service other than services
mentioned in Negative list.

WHAT IS SERVICE ?
Service has been defined in clause (44) of the new section 65B and means
any activity
for consideration
carried out by a person for another
and includes a declared service.
The said definition further provides that Service does not include
any activity that constitutes only a transfer in title of (i) goods or (ii)
immovable property by way of sale, gift or in any other manner
(iii) a transfer, delivery or supply of goods which is deemed to be a sale of
goods within the meaning of clause (29A) of article 366 of the Constitution
a transaction only in (iv) money or (v) actionable claim
a service provided by an employee to an employer in the course of the
employment.

fees payable to a court or a tribunal set up under a law for the time being in
force.
There are four explanations appended to the definition of service which are
dealt with in later part of this Guidance Note. Each of the ingredients bulleted
above have been explained in the points below.

WHAT IS NOT SERVICE ?

The definition of service u/s 65B(44) further provides that service does not include 1. Any activity that constitutes only a transfer is in goods or immovable property by way
of sale, gift or in any manner.
2. A transfer, deliver or supply of goods which is deemed to be a sales of goods within
the meaning of clause (29A) of articles 366 of the constitution.
3. A transaction only in money or in actionable claim.
4. A service provided by an employee to an employer in the course of the employment.
5. Fees payable to a court or a tribunal set up a law for the time begin in force.

CH - 2. REGISTRAION [S.69 & RULE 4].

1). Application : The following should apply for registration under the
Service Tax Act- (1) Every person who has provided a taxable service of value

exceeding Rs.9 lakhs, in the preceding financial year, is required to register

with the service Tax office having jurisdiction over the premises or office of
such service provider.
(2) A recipient who is liable to pay service tax.
(3) The Input Service Distributors.
2). Need : Registration is identification of an assessee. Identification is
necessary to deposit service tax, file returns and undertake various processes
ordained by law relating to service tax. A person liable to pay service tax must
apply for registration before he starts playing service tax and filings of return.
Service provider should apply well in advance to obtain registration, which is
normally granted within 7days of filing of application. If registration is not
granted within seven days, it is deemed to have been granted. Failure to obtain
registration would attract penalty upto Rs 20,000 or Rs 200 for every day
during which such failure continues, whichever is higher. It should be noted
that assessee means a person liable to pay service tax and include his agent.
3). Period :(a) When a person commences business of providing a taxable service, he is
required to register himself within 30 days of such commencement of
business.
(b) In case service tax is extended to a new service, an existing service

provider must register himself, unless he is eligible for exemption under any
notification, within a period of 30days from the date of new levy.It should be
noted that the word person shall include any company or association or body
of individuals, whether incorporated or not. Thus, this expression includes any
individual, HUF, proprietary firm or partnership firm, company, trust,
institution, society etc.
4). Procedure :- A prospective service tax assessee (service provider or
service receiver) or Input Service Distributor seeking registration should file
an application in FORM ST-1 (in duplicate) before the jurisdictional service
tax officer. To verify the correctness of declaration in the above form, certain
documents such as copy of PAN card, proof of address of business premise(s),
constitution of the business [proprietorship, firm, company, trust, institute etc.]
etc. May be required by the registering authority. The copies may self-certified
by the applicant. In case of doubts in select cases, original documents may
have to be presented for verification.
5). Registration Certificate :- The Registration Certificate in Form ST-2
should be issued within a period of seven days from date of submission of
application ST-1 along with all relevant details/documents. In case the
registration certificate is not issued within seven days, the registration applied

for is deemed to have been granted.

6). Multiple Locations :- Service provider having centralized accounting or
centralized billing system who are located in one or more premises, at their
option, may register such premises or office from where centralized billing or
centralized accounting system are located and thus have centralized
registration.
7). Multiple Services :- Only one Registration Certificate is to be taken even
if the person provides more than one service from the same premises for
which registration is sought. However, while making application for
registration all taxable service provided by the person should be mentioned.
8). Multiple Location & Services :- If there is centralize registration, only
one registration certificate is required for service provided from different
premises, declared in the application for centralized registration.

CH - 3. EXEMPTION UNDER MEGA NOTIFICATION.

The following taxable services have been exempt from the whole of the
service tax leviable thereon under section 66B of the said Act vide mega
exemption notification no. 25/2012 ST dated 20/6/12 namely:1. Services provided to the United Nations or a specified international
organization;

2. Health care services by a clinical establishment, an authorised medical

practitioner or para-medics;
3. Services by a veterinary clinic in relation to health care of animals or birds;
4. Services by an entity registered under section 12AA of the Income tax Act,
1961 (43 of 1961) by way of charitable activities;
5. Services by a person by way of-(a) renting of precincts of a religious place
meant for general public; or
(b) conduct of any religious ceremony;
6. Services provided by-(a) an arbitral tribunal to -(i) any person other than a
business entity; or
(ii) a business entity with a turnover up to rupees ten lakh in the preceding
financial year;
(b) an individual as an advocate or a partnership firm of advocates by way of
legal services to,-(i) an advocate or partnership firm of advocates providing
legal services ;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees ten lakh in the preceding
financial year; or
(c) a person represented on an arbitral tribunal to an arbitral tribunal;
7. Services by way of technical testing or analysis of newly developed drugs,
including vaccines and herbal remedies, on human participants by a clinical
research organisation approved to conduct clinical trials by the Drug
Controller General of India;
8. Services by way of training or coaching in recreational activities relating
to arts, culture or sports;

9. Services provided to or by an educational institution in respect of

education exempted from service tax, by way of,-(b) auxiliary educational
services; or
(b) renting of immovable property.
10. Services provided to a recognised sports body by-(a) an individual as a
player, referee, umpire, coach or team manager for participation in a sporting
event organized by a recognized sports body;
(b) another recognised sports body.
11. Services by way of sponsorship of sporting events organised,-(a) by a
national sports federation, or its affiliated federations, where the participating
teams or individuals represent any district, state or zone;
(b) by Association of Indian Universities, Inter-University Sports Board,
School Games Federation of India, All India Sports Council for the Deaf,
Paralympic Committee of India or Special Olympics Bharat ;
(c) by Central Civil Services Cultural and Sports Board;
(d) as part of national games, by Indian Olympic Association; or
(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;
12. Services provided to the Government, a local authority or a
governmental authority by way of construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance, renovation, or
alteration of -(a) a civil structure or any other original works meant
predominantly for use other than for commerce, industry, or any other
business or profession;
(b) a historical monument, archaeological site or remains of national
importance, archaeological excavation, or antiquity specified under the

Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of
1958);
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical,
or (iii) an art or cultural establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii)
sewerage treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use of their
employees or other persons specified in the Explanation1 to clause 44 of
section 65 B of the said Act;
13. Services provided by way of construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance, renovation, or
alteration of,-(a) a road, bridge, tunnel, or terminal for road transportation for
use by general public;
(b) a civil structure or any other original works pertaining to a scheme under
Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;
(c) a building owned by an entity registered under section 12 AA of the
Income tax Act, 1961(43 of 1961) and meant predominantly for religious use
by general public;
(d) a pollution control or effluent treatment plant, except located as a part of a
factory; or
(e) a structure meant for funeral, burial or cremation of deceased;
14. Services by way of construction, erection, commissioning, or installation
of original works pertaining to,-(a) an airport, port or railways, including
monorail or metro;
(b) a single residential unit otherwise than as a part of a residential complex;

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(c) low- cost houses up to a carpet area of 60 square metres per house in a
housing project approved by competent authority empowered under the
Scheme of Affordable Housing in Partnership framed by the Ministry of
Housing and Urban Poverty Alleviation, Government of India;
(d) post- harvest storage infrastructure for agricultural produce including a
cold storages for such purposes; or
(e) mechanised food grain handling system, machinery or equipment for units
processing agricultural produce as food stuff excluding alcoholic beverages;
15. Temporary transfer or permitting the use or enjoyment of a copyright
covered under clauses (a) or (b) of sub-section (1) of section 13 of the Indian
Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic,
musical, artistic works or cinematograph films;
16. Services by a performing artist in folk or classical art forms of (i) music,
or (ii) dance, or (iii) theatre, excluding services provided by such artist as a
brand ambassador;
17. Services by way of collecting or providing news by an independent
journalist, Press Trust of India or United News of India;
18. Services by way of renting of a hotel, inn, guest house, club, campsite or
other commercial places meant for residential or lodging purposes, having
declared tariff of a unit of accommodation below rupees one thousand per day
or equivalent;
19. Services provided in relation to serving of food or beverages by a
restaurant, eating joint or a mess, other than those having (i) the facility of airconditioning or central air-heating in any part of the establishment, at any time
during the year, and (ii) a licence to serve alcoholic beverages;

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20. Services by way of transportation by rail or a vessel from one place in

India to another of the following goods -(a) petroleum and petroleum products
falling under Chapter heading 2710 and 2711 of the First Schedule to the
Central Excise Tariff Act, 1985 (5 of 1986);
(b) relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap;
(c) defence or military equipments;
(d) postal mail or mail bags;
(e) household effects;
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) railway equipments or materials;
(h) agricultural produce;
(i) foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt
and edible oil, excluding alcoholic beverages; or
(j) chemical fertilizer and oil cakes;
21. Services provided by a goods transport agency by way of transportation of
-(a) fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;
(b) goods where gross amount charged for the transportation of goods on a
consignment transported in a single goods carriage does not exceed one
thousand five hundred rupees; or
(c) goods, where gross amount charged for transportation of all such goods for
a single consignee in the goods carriage does not exceed rupees seven hundred
fifty;
22. Services by way of giving on hire -(a) to a state transport undertaking, a
motor vehicle meant to carry more than twelve passengers; or
(b) to a goods transport agency, a means of transportation of goods;

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23. Transport of passengers, with or without accompanied belongings, by (a) air, embarking from or terminating in an airport located in the state of
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, or Tripura or at Bagdogra located in West Bengal;
(b) a contract carriage for the transportation of passengers, excluding tourism,
conducted tour, charter or hire; or (c) ropeway, cable car or aerial tramway;
24. Services by way of vehicle parking to general public excluding leasing of
space to an entity for providing such parking facility;
25. Services provided to Government, a local authority or a governmental
authority by way of -(a) carrying out any activity in relation to any function
ordinarily entrusted to a municipality in relation to water supply, public
health, sanitation conservancy, solid waste management or slum improvement
and upgradation; or (b) repair or maintenance of a vessel or an aircraft;
26. Services of general insurance business provided under following schemes (a) Hut Insurance Scheme; (b) Cattle Insurance under Swarnajaynti Gram
Swarozgar Yojna (earlier known as Integrated Rural Development
Programme); (c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;
(h) Weather Based Crop Insurance Scheme or the Modified National
Agricultural Insurance Scheme, approved by the Government of India and
implemented by the Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);

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(k) Pilot Scheme on Seed Crop Insurance;

(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana; or
(o) Coconut Palm Insurance Scheme;
27. Services provided by an incubatee up to a total turnover of fifty lakh
rupees in a financial year subject to the following conditions, namely:-(a) the
total turnover had not exceeded fifty lakh rupees during the preceding
financial year; and
(b) a period of three years has not been elapsed from the date of entering into
an agreement as an incubatee;
28. Service by an unincorporated body or a non- profit entity registered under
any law for the time being in force, to its own members by way of
reimbursement of charges or share of contribution -(a) as a trade union;
(b) for the provision of carrying out any activity which is exempt from the
levy of service tax; or
(c) up to an amount of five thousand rupees per month per member for
sourcing of goods or services from a third person for the common use of its
members in a housing society or a residential complex;
29. Services by the following persons in respective capacities -(a) sub-broker
or an authorised person to a stock broker;
(b) authorised person to a member of a commodity exchange;
(c) mutual fund agent to a mutual fund or asset management company;
(d) distributor to a mutual fund or asset management company;
(e) selling or marketing agent of lottery tickets to a distributer or a selling
agent;

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(f) selling agent or a distributer of SIM cards or recharge coupon vouchers;

(g) business facilitator or a business correspondent to a banking company or
an insurance company, in a rural area; or
(h) sub-contractor providing services by way of works contract to another
contractor providing works contract services which are exempt;
30. Carrying out an intermediate production process as job work in relation to
-(a) agriculture, printing or textile processing;
(b) cut and polished diamonds and gemstones; or plain and studded jewellery
of gold and other precious metals, falling under Chapter 71 of the Central
Excise Tariff Act ,1985 (5 of 1986);
(c) any goods on which appropriate duty is payable by the principal
manufacturer; or
(d) processes of electroplating, zinc plating, anodizing, heat treatment, powder
coating, painting including spray painting or auto black, during the course of
manufacture of parts of cycles or sewing machines upto an aggregate value
of taxable service of the specified processes of one hundred and fifty lakh
rupees in a financial year subject to the condition that such aggregate value
had not exceeded one hundred and fifty lakh rupees during the preceding
financial year;
31. Services by an organiser to any person in respect of a business exhibition
held outside India;
32. Services by way of making telephone calls from -(a) departmentally run
public telephone;
(b) guaranteed public telephone operating only for local calls; or
(c) free telephone at airport and hospital where no bills are being issued;
33. Services by way of slaughtering of bovine animals;

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34. Services received from a provider of service located in a non- taxable

territory by-(a) Government, a local authority, a governmental authority or an
individual in relation to any purpose other than commerce, industry or any
other business or profession;
(b) an entity registered under section 12AA of the Income tax Act, 1961 (43 of
1961) for the purposes of providing charitable activities; or
(c) a person located in a non-taxable territory;
35. Services of public libraries by way of lending of books, publications or
any other knowledge- enhancing content or material;
36. Services by Employees State Insurance Corporation to persons
governed under the Employees Insurance Act, 1948 (34 of 1948);
37. Services by way of transfer of a going concern, as a whole or an
independent part thereof;
38. Services by way of public conveniences such as provision of facilities of
bathroom, washrooms, lavatories, urinal or toilets;
39. Services by a governmental authority by way of any activity in relation to
any function entrusted to a municipality under article 243 W of the
Constitution.
40. Services by way of loading, unloading, packing, storage or warehousing of
rice.

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CH - 4. THRESHOLD EXEMPTION [33/2012].

Rs.10 Lakhs: Taxable services provided by service provider are exempted
from whole of service tax leviable there-on upto the aggregate taxable
value Rs. 10Lakhs. [Notification No. 33/2012 - S. T. Dt. 20-06-12]
Not Applicable: Above exemption is not applicable to :(a) taxable service provide by a person under a brand name or trade name,
whether registered or not, of another person or;
(b) Such value of taxable service in respect of which service tax shall be
paid by recipient of service under S. 68(2) read with service tax rules,
1994 (Goods Transport Agency, Insurance Agent, MF Agent, etc.
Conditions: Above exemption is admissible subject of following
conditions :(a) Option: Taxable service provider has the option not to avail the said
exemption and pay service tax on the taxable service and such option once
exercised in a financial year shall not be withdrawn during the remaining
part of such financial year.

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(b) No CENVAT Credit On Inputs: The provider of service shall not avail
cenvat credit of service tax paid on any input used for providing taxable
service on which exemption of small scale is availed.
(c) No CENVAT Credit on Capital Goods: The provider of taxable
service shall not avail cenvat credit under rule 3 of the cenvat credit rules
2004, on capitals goods during the period in which the service provider
avails small scale exemption.
(d) CENVAT Credit after paying Taxes: The provider of taxable service
shall avail CENVAT Credit only on such input or input service received
on or the date on which the service provider starts paying service tax and
used for provision taxable service on which service tax is payable.
(e) All Premises/Services: This notification shall apply to the aggregate
value of one or more taxable services provided form one or more premises
and not separately for each premises or each service.
(f) Preceding P.Y: The aggregate value of taxable services rendered by a
provider of such service from one or more premises should not exceed
exemption limit fixed (i.e. Ten Lakhs) in the preceding financial year.
GTA: For the purposes of determining aggregate value not exceeding Ten
Lakhs rupees, to avail exemption under this notification, in relation to
taxable service provided by a goods transport agency, the payment
received towards the gross amount charged by such goods transport
agency under section 67 of the said finance Act for which the person
liable for paying service tax is the consignor / consignee [as specified
under section 68(2) of the said Financial Act read with Service Tax Rules,
1994], shall not be taken in to account.
Definitions: For the purpose of the notification -

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(a) brand name or trade name means a brand name or a trade name,
whether registered or not, that is to say, a name or a mark, such as a
symbol, monogram, logo, label, signature, or invented word or writing
which is used in relation to such specified services for the purpose of
indicating, or so to indicate a connection in the course of trade between
such specified services and some person using such name or mark with or
without any indication of the identity of that person;
(b) aggregate value means the sum total of value of taxable service
charged in the first consecutive invoices issued during a financial year but
does not include value charged in invoices issued towards such section
66B of the said Financial Act or under any other notification.
1-7-2012: This notification shall come into force on the 1 st day of July,
2012.
Special Points: The following special points should be kept in mind (a) Brand Name : If a person provides two services - a taxable service
under a brand name of another person and another taxable service,
threshold exemption will not apply to the service under brand name:
however, he can avail threshold exemption for the other service.
Threshold exemption is not available if the brand name is of a service
provider. Exemption is available if the brand name is in respect for
goods .
(b) Tax by Recipient: The threshold exemption does not apply where tax
is payable by service recipient on behalf of insurance agents will have to
pay tax on insurance commission earned by an insurance agent, even if
the amount is lees than the threshold exemption i.e. Rs. 10Lakhs.

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(c) Invoices: The threshold exemption is computed on the basis of

invoices raised and not the payments receives. Once the invoices issued
cross the limit of Rs. 10Lakh, the subsequent services became taxable.
The exemption is not affected even if payment is not receives
subsequently.
(d) GTA: For Goods Transport Agency (GTA), the aggregate value is
to be determined after excluding the amount charged by the GTA for
which the consignor / consignee is liable to pay the tax.
(e) Option: The decision not to claim the exemption and pay the tax must
be taken by the service provider of tax became due (5 th May or 5th July, as
the case may be).

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CH - 5. Service Tax Return.

Records
According to Rule 5 of Service Tax Rules, 1994, records include computerized
data and means the record as maintained by an assessee in accordance with the
various laws in force from time to time. Records maintained as such shall be
acceptable to Central Excise Officer. Every assessee is required to furnish to
the Central Excise Officer at the time of filing his return for the first time a list
of all accounts maintained by the assessee in relation to Service Tax including
memoranda received from his branch offices. This intimation may be sent
along with a covering letter while filing the service tax return for the first time.

Invoice
Rule 4A prescribes that taxable services shall be provided and input credit
shall be distributed only on the basis of a bill, invoice or challan. Such bill,
invoice or challan will also include documents used by service providers of
banking services (such as pay-in-slip, debit credit advice etc.) and
consignment note issued by goods transport agencies. Rule 4B provides for
issuance of a consignment note to a customer by the service provider in
respect of goods transport booking services.

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CH - 6. PENALTY & INTEREST.

PENALTY :- If a person who is liable to pay service tax fails to pay service
tax, he shall pay in addition to such tax and interest in accordance with the
provisions of section 75 of the Act, a penalty which shall not be less than Rs.
100/- for every day during which such failure continues or @1% of such tax
per month, whichever is higher. However, the penalty amount payable shall
not exceed 50% of the amount of Service Tax payable.
ILLUSTRATION:X,an assessee, this fails to pay service tax of ten lakh rupees payable by 5 th
March 2014. X pays the amount on 15th March 2014. The default has
continued for ten days. Compute the amount of penalty.
Solution :- The penalty payable by X is computed as follows :
1. 1% of the amount of default for 10 days = 1/100 x 10,00,000 x 10/31 =
Rs.3,225.80
2. Penalty calculated @ Rs. 100 per day for 10days = Rs. 1,000
3. Penalty liable to be paid is Rs. 3,226.00.
INTEREST :- Every person, liable to pay the service tax in accordance with
the provisions of section 68 of the Act or rules made there under, who fails to
credit the tax or any part thereof to the account of the central government
within the period prescribed, shall pay simple interest @ 18% per annum
w.e.f. 1-4-2011 [Notification No. 15/2011- ST]. The rate will be 15% for tax

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payers with turnover below Rs. 60Lakhs in the preceding financial year.
Interest is payable for the period from the first day after the due date till the
date of payment of any defaulted service tax amount.

CH - 7. PAYMENT OF SERVICE TAX.

Who is liable to pay Service Tax.
The following persons are liable to pay service tax.
1]. Service Provider [S. 68(1)]: Every person providing taxable service to any
person shall pay service at the rate specified in section 66B in such manner
within such period as may be prescribed. Manner and period are prescribed
vide Rule 6 of the Service Tax Rules, 1994.
2]. Services Receiver (Reverse charge mechanism) [S.68(2)]: In respect of
certain taxable services notified by the central government, the service tax
thereon shall be paid by the service receiver and in such manner as any be
prescribed and all the provisions of the act shall apply to such person as if he
is the person liable for paying the service tax in the relation such service.
The service notified under this category and the person liable to pay service
tax thereon are shown in the exhibit below : [Rule 2(1)(d) of service tax
rules,1994].
3]. Service tax to be paid partly by service provider and partly by service
receiver (partial reverse charge mechanism) : The Central Government may
notify the service and the extent of service tax which shall be payable by the
service receiver and the provisions of this chapter shall apply to him to the
extent so specified and the remaining part of the service tax shall be paid by
the service provider.

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The service provider notified under this category and the extent of service tax
payable thereon by the person who provides the service and the person who
receives for the taxable services shall be as specified in the following table.

EXHIBIT 1. Partial Reverse Charge.

Service Provider : Service provider located in the taxable territory must
fall under any one of the following categories :
(i) Individual;
(ii)Hindu Undivided Family;
(iii)Partnership firm, whether registered or not; or
(iv)Association Of Persons
Service Recipient : Service Recipient located in the taxable territory must
be a Business Entity registered as a Body Corporate.

Service Tax Payable In The Prescribed Manner

1]. Due Dates [Rules 6(1)] :
(A) Payment through Bank :
Category

Frequency

In case of Individuals,

Quarterly

Proprietary Firms &

below :-

Partnership Firms

(i) For Q.E. 30th June

- by 5th July

(ii)For Q.E. 30th Sept

- by 5th Oct.

Others (e.g. Companies,

Societies, Trusts etc.)

as

Due Dates

mentioned

(iii)For Q.E. 30th Dec

- by 5th Jan.

(iv)For Q.E. 31st March

- by 31st March

Monthly

By

5th

of

the

month

immediately following the

month in which service is
deemed to be provided.
However, in case of March,
the

payment

should

made before 31 March.

st

be

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From G.A.R.7 (previously known as TR6 challan) should be used to make service tax
payments at the Bank. Payment service tax may be made at the specified branches of the
designated banks.
(B) Electronic Payments through Internet :
Category

Frequency

In case of Individuals,

Quarterly

Proprietary Firms &

below :-

Partnership Firms

(i) For Q.E. 30th June

- by 6th July

(ii)For Q.E. 30th Sept

- by 6th Oct.

Others (e.g. Companies,

Societies, Trusts etc.)

as

Due Dates

mentioned

(iii)For Q.E. 31th Dec

- by 6th Jan.

(iv)For Q.E. 31st March

- by 31st March

Monthly

By

6th

of

the

month

immediately following the

month in which service is
deemed to be provided.
However, in case of March,
the

payment

should

be

made before 31 March.

st

2]. Individual / Firms [Rules 6(1) - Prov.] : In case of individuals and

partnership firms whose aggregate value of taxable services provided from one
or more premises is fifty lakh rupees or less in the previous financial year, the
service provider shall have the option to pay tax on taxable services provided
or to be provided by him upto a total of rupees fifty lakh in the current
financial year, by the dates specified in this sub-rule with respect to the month
or quarter, as the case may be, in which payment is received.

3]. Advance Payment of Service Tax [RULE 6(1A)] : The assessee has been
provided a facility to make advance payment of service tax on his own and
adjust the amount so paid against the service tax which he is liable to pay for
the subsequent period. Such facility shall be a available when the assessee :

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(i) intimates the detail of the amount of the service tax paid in advance, to the
jurisdictional superintendent of central excise within a period of 15 days from
the date of such payment, and
(ii) indicates the details of advance payments made, and its adjustment, if any
in the subsequent return to be field under section 70.
4]. E-Payment [Rule 6(2)] ; E-Payment is a payment made through which a
taxpayer can remit his tax dues to govt. (CBEC) using internet banking
service. It is an additional facility being offered by the banks besides
conventional procedure. The e-payment is mandatory for the assessee who has
paid service tax of Rs. 1Lakh or above in the preceding financial year or has
already paid service tax of Rs. 1Lakh in the current financial year.
5].Self adjustment of service tax where service are partly or wholly not
rendered [Rule 6(3)] : Where an assessee has issued an invoice, or received
any payment, against a service to be provided which is not so provided by him
wholly or partially for any reason or where the amount of invoice is
renegotiated due to deficient provision of service, or any terms contained in a
contract, the assessee may take the credit of such excess service tax paid by
him, if the assessee :
(a) has refunded the payment or part thereof, so received for the service
provided to the person from whom it was received; or
(b) Has issued a credit note for the value of the service not so provided to the
persons to whom such invoice had been issued.

CH - 8. NEGATIVE LIST OF SERVICES.

26

In terms of Section 66B of the Act, service tax will be leviable on all services
provided in the taxable territory by a person to another for a consideration
other than the services specified in the negative list. The services specified in
the negative list therefore go out of the ambit of chargeability of service tax.
The negative list of service is specified in the Act itself in Section 66 D. For
ease of reference the negative list of services is given in Exhibit A1. In all,
there are seventeen heads of services that have been specified in the negative
list. The scope and ambit of these is explained in paras below.

Services provided by Government or local authority

No. Most services provided by the Central or State Government or local
authorities are in the negative list except the following:
a) services provided by the Department of Posts by way of speed post, express
parcel post, life insurance, and agency services carried out on payment of
commission on non government business;
b) services in relation to a vessel or an aircraft inside or outside the precincts
of a port or an airport;
c) transport of goods and/or passengers;
d) support services, other than those covered by clauses (a) to (c) above, to
business Entities.

No. If the services provided by the government or local authorities that have
been excluded from the negative list entry are otherwise specified in the
negative list then such services would also not be taxable.

27

Government would include various departments and offices of the Central or

State Government or the U.T. Administrations which carry out their functions
in the name and by order of the President of India or the Governor of a State.
For the support services provided by the Government, other than where such
support services are by way of renting of immovable property, to business
entities government departments will not have to get registered because
service tax will be payable on such services by the service receiver i.e. the
business entities receiving the service under reverse charge mechanism in
terms of the provisions of section 68 of the Act and the notification issued
under the said section as well Service Tax Rules, 1994. For services mentioned
at (a) to (c) of the list (point 4.1.1 above refers) and renting of immovable
properties the tax will be payable by the concerned department.

Support services have been defined in section 65B of the Act as

infrastructural, operational, administrative, logistic marketing or any other
support of any kind comprising functions that entities carry out in ordinary
course of operations themselves but may obtain as services by outsourcing
from others for any reason whatsoever and shall include advertisement and
promotion, construction or works contract, renting of movable or immovable
property, security, testing and analysis. Thus services which are provided by
government in terms of their sovereign right to business entities, and which
are not substitutable in any manner by any private entity, are not support
services e.g. grant of mining or licensing rights or audit of government entities
established by a special law, which are required to be audited by CAG under
section 18 of the Comptroller and Auditor-Generals (Duties, Powers and

28

Conditions of Service) Act, 1971 (such services are performed by CAG under
the statue and cannot be performed by the business entity themselves and thus
do not constitute support services.)

CH - 9. EXCLUDED SERVICES.
SERVICES SPECIFICALLY EXCLUDED
The definition of service u/s 65B(44) provides that services does not include

29

Title :- Any activity that constitutes only a transfer in title of goods or

immovable property by way of sale, gift or in any other manner.
Immovable property include land,, benefit arising out of land, and things
attached to the earth, or permanently fastened to anything attached to the
earth.
Goods :- A transfer, delivery or supply of goods which is deemed to be
sale of goods within the meaning of clauses (29A) of article 366 of the
constitution.
Goods Define in section 65B(25) of the Act means every kind of
movable

property other than actionable claims and money; and

includes securities, growing

crops, grass and things attached to or

forming part of the land which are agreed to be severed before sale or
under contract of sale .
Money :- A transaction only in money or actionable claim. Transaction
only in money do not constitute service, for example:The principal amount of deposit in or withdrawals from a bank account.
Advancing or repayment of principal sum on loan to someone.
Conversion of currency note into coins.
Employee :- A service provided by an employee to an employer in the
course of employment.Only services that are provided by the employee to
the employer in the course of employment are outside the scope of
services. Services provided beyond employment for a consideration would
be a service. Service provided on contract basis i.e. Principal-to-principal
basis are not services provided in the course of employment.

30

Fees :- Fees payable to a court or a tribunal set up under a law for time
being in force.
MP/MLA :- Duties of an M.P/M.L.A. Service does not cover function
or duties performed by members of parliament, State Legislatures,
Panchayat, Municipalities or any other local authority. [Explanation 1(A)
to s.65B(44).
Constitutional Post :- Duties of a person holding constitutional posts.
Service does not cover function or duties performed by any person who
holds any post in pursuance of the provisions of the constitution
[Explanation 1(B) to s. 65B(44)] e.g. Central Vigilance Commission,
Competition Commission of India, Khadi and Village Industries
Commission (KVIC), Commission of India, Planning Commission, Staff
Selection Commission, Union Public Service Commission (UPSC), etc.
Govt. Body :- Duties of a Govt. Body. Service does not cover function
or duties performed by any person as a chairperson or a member or a
director in a body established by the Central or state government or local
authority and who is not deemed as an employee. [Exemption 1(C) to s.
65B(44)]. Some of the bodies set up by the Maharashtra Govt. Are MIDC,
MSEB, MSRDC, MTDC, MMRDA, etc.
These exclusion are explained in detail below.

CH - 10 Place Of Provision Of Services.

1) POP Rules: In terms of section 66B, a service is taxable only when, inter
alia, it is provided (or agreed to be provided) in the taxable territory. Thus,
the taxability of service will be determined based on the place of its

31

provision (POP). The place of provision of service rules, 2012 specify the
manner to determine the taxing jurisdiction for a service.

2) Place where a service is deemed to be provided : Place of provision of

service rules specifies the manner to determine the taxing jurisdiction for a
service. These rules would determine the place where a service shall be
deemed to be provided, in term of section 66C read with section 94(hhh) of
chapter V of the finance Act, 1994. Thus, if a service is provided in taxable
territory as per the said rules, it shall be chargeable to service tax, otherwise
not. These rules have been notified vide notification No. 28/2012-S.T. Dated
20.06.2012. The rules apply even if either the service provider or the service
recipient or both are located at a place outside the taxable territory [s. 66C(2)].

3) Persons for whom the rules are relevant: Place of provision of service
rules are useful for - (i) the person who deal in cross border services.
(ii) those who have operation with suppliers or customers in the state of
Jammu and Kashmir.
(iii) service provider operating within in India from multiple locations, without
having centralized registration, for determining the prices taxable jurisdiction
applicable to there operations.
(iv) determining services that are wholly consumed within a SEZ, to avail the
outright exemptions.

4) Power of the Central Government to frame the rules : Section 66C

empowers the central government to frame rules having regard to the nature
and description of various services, to determine the place where such services

32

are provided or deemed to have been provided or agreed to be provided or

deemed to have been agreed to be provided. Any rule made here under shall
not be invalid merely on the ground that either the service provider or the
service receiver or both are located at a place being outside the taxable
territory.

CH - 11. ILLUSTRATIONS.
Compute taxable value tax thereon (assume that all sums received are
exclusive of service tax) (Ignore small service providers exemption and abatements)
1) Development of customised software : Rs. 120 Lakh.
2) Supply of pre-packaged software on CD : Rs.25 Lakh
3) Onsite development of software : Rs. 6Lakh
4) Advice, consultancy, etc. Relating to software :Rs 9Lakh
5) Licensing of software delivered online : Rs. 9Lakh
6) Repair of software :Rs. 2Lakh
7) Implementation related services of software :Rs. 5Lakh

Solution :-Computation of Taxable Value

Particulars

Rs.

1]. Development of customised software:-Rs.120Lakh Taxable u/s 66(E) - Not a sale of goods
2]. Supply of pre-packaged software on CD:-Rs.25Lakh Since pre-packaged software was put on a media, it

1,20,00,000

33

Became goods and, therefore, it is Not liable to service

Tax u/s 66D.[Trading of goods - Negative List Entry-5]

NIL

3]. Onsite development of software:- Rs.5Lakh - Taxable

U/s. 66E.

5,00,000

4]. Advice, consultancy, etc. Relating to software:- Rs.6Lakh

Taxable as it constitutes service.

6,00,000

5]. Licensing of software delivered online:- Rs.9Lakh Delivery of software online is not goods and hence,
It is a service liable to service tax.

9,00,000

6]. Repair of software :- Rs.2Lakh - Taxable

2,00,000

7]. Implementation related services of software :-Rs.5Lakh Taxable u/s 66E(d)

5,00,000

Taxable Value
Tax at 12.36%

1,47,00,00
18,16,920

ABC Ltd. Received the following sums (exclusive of taxes). Compute

service tax liability (Ignore small service providers exemption and
abatement) 1) Manufacture of exempted excisable goods :- Rs. 13Lakh.
2) Manufacture of dutiable excisable goods :- Rs. 4.3Lakh.
3) Job-work on goods on which duty is paid by principal manufacture :Rs.8Lakh.
4) Job-work on goods on which no duty is payable by principal
manufacture due to exemption :- Rs. 17Lakh.

34

5) Manufacture of alcohol /wine :- Rs. 5Lakh.

6) Job-work of printing :- Rs. 3Lakh.
7) Job-work of textile processing :- Rs. 1Lakh.

Solution :Computation of Service Tax Liability

Computation of Taxable Value
Particulars

Rs.

1]. Manufacture of exempted excisable goods :Rs. 13Lakh - Covered within Negative List u/s.66D(f)

NIL

2]. Manufacture of dutiable excisable goods :- Rs.4.3Lakh

- Covered within Negative List u/s.66D(f)

NIL

3]. Job-work on goods on which duty is paid by principal

Manufacture :- Rs.8Lakh - Exempt Wide NN25/2012

NIL

4]. Job-work on goods on which no duty is payable by Principal manufacture due to exemption :-Rs.17Lakh
Taxable, as no appropriate duty paid by principal
Manufacture.

17,00,000

5]. Manufacture of alcohol/wine :- Rs.5Lakh -Covered

Within Negative List u/s.66D(f).

NIL

6]. Job-work of printing :-Rs.3Lakh -Exempt vide

NN 25/2012 -Entry 30(a)

NIL

7]. Job-work of textile processing :-Rs.1Lakh Exempt vide NN 25/2012 -Entry 30(a)
Taxable Value
Tax at 12.36%

NIL
17,00,000
2,10,120

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CH - 12. BIBLIOGRAPHY

Refers from Direct & Indirect Taxes Books of M.Com Part-II

Sem - III & IV.
WWW.SLIDESHARE.COM
Refers from Education Guide
Service Tax Notes.

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